Kingfish uncovers some interesting facts about the Jackson bond fees

Highlights
*The proposed refinance of Jackson’s 2002 and 2004 bonds will cost $4,071,000 in fees, even though the principal amounts are $33 million less (See page 14 of Swap discussion doc) and the fees for the original transactions were only $1.5 million
*These services were NOT competitively bid but were instead “privately negotiated”.
*Sarah O’Reilly Evans, City Attorney, is paid $60,000 in fees for the refinances
*The bond advisor, Sterne Agee, was paid based on a percentage rate. Sterne Agee’s advice was based on the size of the refinances and contingent upon their closing, while they were supposedly providing “objective” analysis.
*The refinances are based on adjustable rates. Houston was badly burned when the interest rates on its bonds under a similar arrangement rose to 15% recently.
*This deal was proposed by Melton’s finance director, and Marshand Crisler sponsored the motion to adopt the resolution.
*Derivatives are financial contracts whose value is based on other securities or indexes; interest-rate swaps are tied to future changes in lending rates.